9. Assessment of the hybrids and the preferred option

9. This section examines the two pairs of three hybrids
discussed in section 8.4. Section 9.1 considers the 3 delivery
hybrids under the
MCA lens and
section 9.2 does the same for the 3 assessment models. Section 9.3
considers the costs of the hybrids including sensitivity analysis
and, finally, section 9.4 considers the preferred option that
should be taken forward to Final Business Case.

9.1
MCA assessment
of Hybrids

9.1. Hybrids X and Z are more likely to successfully deliver
Dignity and Respect outcomes than Hybrid Y. Hybrid
X offers greater flexibility of the type of advice and support and
better alignment with the existing advice and support around other
public services. Hybrid Z provides a greater local presence and
more comprehensive face-to-face advice and support, which together
with local case management and decision-making may be more
preferable for some people. Hybrid Y is the weakest of the three
hybrids, as people would be required to travel greater distances to
access advice and support services. Both Hybrids Y and Z have
advantages in terms of offering more scope to set and maintain a
certain organisational culture and provide a more transparent
system from the accountability perspective.

9.2. Hybrid X is considered the strongest option in terms of
Equality and Poverty, largely because more
comprehensive phone and online support would allow more tailored
interaction with specific groups. Accessing support online or over
the phone may be a better option for those on low incomes than
travelling to local offices. Hybrid Y is the weakest option because
of travel that may be required for some people to access
face-to-face support, with Hybrid Z providing a more accessible
system in comparison. Hybrid Z could provide more consistent advice
and support service as it would be delivered from agency's own
offices.

9.3. Hybrid X and Hybrid Z both have strengths and weaknesses in
relation to different aspects of
Efficiency and Alignment, but on balance are
expected to be similar in how they perform on this measure and are
considered to be somewhat stronger than Hybrid Y. Hybrid X allows
for more scope to explore efficiencies within existing public
services by co-locating advice and support functions and
potentially delivering the same services with fewer resources. With
Hybrid Z, local case management could speed up certain functions
and create a more streamlined model and with one local office per
Local Authority, some efficiencies could be explored through
co-location, which cannot be achieved to the same extent with
Hybrid Y.

9.4. In terms of
Implementability and Risk, Hybrid Y ranks higher
than the other two hybrids, although the differences in the
delivery challenges presented make comparisons difficult. Hybrid X
presents a greater implementability challenge because of risks
around ensuring effective co-location and co-production and
functional phone and online support. However, Hybrid X could be
delivered quicker, as it does not require local office estate
procurement. Hybrid Z is expected to take the longest to become
operational because of the number of local offices.

9.5. On balance, it is deemed that Hybrid Z is marginally
stronger than other hybrids on
Economy and Environment, despite poorer
performance against resource consumption related criteria. This is
because it less likely to have a direct impact on existing public
sector services, which could be negative due to capacity issues in
some areas under Hybrid X. Hybrid Y is considered to be the
weakest, partly because it could increase the burden on existing
third sector advice services if advice and support is limited to 8
local offices.

9.6. The results are summed up in Figure 18 below.

Figure 18 -
MCA for hybrid
delivery structures

9.2
MCA assessment
of assessment models

9.7. Overall, model
MA2 is considered
to be the best model when ranked against the
Dignity and Respect criteria. Conducting
face-to-face assessments from fixed locations, with outreach
services for certain cases and most assessors being solely employed
be the agency provides the most flexibility and choice. Model
MA3 has the
advantage of
NHS
professionals with the right level of knowledge providing the
evidence for assessments which could improve decision-making, as
well as wider public perception about benefit claimants. However,
this model may not be sufficiently flexible in terms of timing and
location of assessments and accountability lines may become blurred
between the agency and the
NHS from the
perspective of those being assessed. Model
MA1 is considered
the weakest model of the three because of the lack of flexibility
it offers. Home-based face-to-face assessments may suit some
people, especially those living in remote rural areas, as well as
those who cannot travel because of their disability. However,
default home-based assessment is unlikely to suit everyone's needs
because of differences in suitability of people's homes for
assessment and could result in assessments being of lower quality
and consistency.

9.8. On balance, models
MA1 and
MA3 are considered
to be somewhat more favourable in terms of
Equality and Poverty, although on balance the
differences between the three models are likely to be small. Model
MA3 could
encourage greater take-up of benefits by reducing stigma and fear
of the assessment process. Model
MA1 eliminates the
requirement to travel to face-to-face assessment location which can
be a considerable upfront cost for those on low income even if
expenses are reimbursed. Although weaker on this criteria set than
the other two options, model
MA2 is most likely
to deliver better outcomes in terms of the fairness element, as the
process of assessment and skills of assessors are more likely to be
consistent across cases.

9.9. There was found to be little difference between models
MA1 and
MA2 in terms of
Efficiency and Alignment. Both are likely to be
more efficient models from the process perspective than model
MA3. It is likely
that the assessment process would be less simple and streamlined
with model
MA3, not least
because the
NHS
professionals could only work on cases on a part-time basis. Model
MA3 may also
present difficulties around Ministerial ability to implement policy
changes around assessments.

9.10. Model
MA2 performs best
against the
Implementability and Risk criteria, as it most
closely resembles the model that is in place at the moment, without
the element of private sector involvement. The biggest challenge in
model
MA2 is finding
suitable premises for conducting assessments, which is considered
to be of smaller difficulty than those presented by models
MA1 and
MA3, which are
largely around recruiting and retaining a sufficient number of
assessors. The mobile worker model in
MA1 may not be
sufficiently attractive as an employment opportunity and there is
an additional risk associated with assessments being done through
home visits not being implementable because of unsuitability of
some people's homes for such a purpose. Despite potentially
positive public perception at the outset, model
MA3 is considered
to be the weakest in terms of Implementability and Risk, as the
existing
NHS workforce
may not have a sufficient level of inclination and/or capacity to
meet the assessment requirements and any incentives that displace
existing resource away from healthcare to social security may prove
difficult.

9.11. On balance, there is not a substantial difference in how
the three models of assessment perform against the
Economy and Environment criteria, although the
models differ in their performance on individual aspects of this
criteria set. Model
MA1 is the weakest
in terms of employee satisfaction as the mobile worker model could
involve a lot of travel for the assessors and current public
attitudes to the benefits assessment process may make home visits a
stressful element of the job. Model
MA2 requires both
parties to travel to the assessment location and requires more
resource consumption because of the use of fixed locations for
assessments. Model
MA3 has the
potential to have a detrimental impact on the performance of the
NHS.

9.12. The results are summed up in Figure 19 below.

Figure 19 -
MCA results for
assessments

9.3 Costs of the hybrids

9.13. The majority of the social security system does not alter
between the hybrids, with the agency undertaking the functions
around administration, dispute resolution, error management /
investigation and management information in the same way for all
the hybrids.

9.14. Where the functions differ is around pre-claims support
and advice and assessment. Varying the approach to these functions
does however have knock-on effects on the constant capabilities and
enabling systems required, the services that support these
functions, and the estates footprint needed to deliver them. This
means that the overall estimates of steady-state running costs vary
not only between the three hybrid options, but also for each hybrid
and assessment variant.

9.15. There are therefore separate estimates of cost for each of
9 scenarios - each of the three hybrids X, Y and Z with each of the
assessment models
MA1,
MA2 and
MA3.

9.3.1 Point estimates and Average estimates

9.16. The cost model is built up by estimating the expenditure
required for each individual function, combined with assumptions
about how that function will be delivered under each hybrid, and
assumptions about the work required to manage that function. For
each benefit, we have assumed that the caseload remains the same as
it currently stands, that the number of new claims (in-flows) and
the number of claims ending (out-flows) are similar to current
patterns, and that the associated administrative requirements
remain the same as they are now.

9.17. For each function, we can estimate not only a point
estimate of costs, but also a likely distribution of costs, based
around likely ranges. Monte Carlo simulation methods are then used
to sample costs from these distributions, which are then combined
to give an empirical distribution of total costs.

9.18. For most of the cost components the distributions are
relatively symmetric. But it is worth noting that for the purposes
of this modelling exercise, the uncertainty associated with the
steady-state costs of
IT and Digital
infrastructure is greater than for the other cost components,
spanning a range up to three times the central estimate. This is in
line with
HMT guidance on
'optimism bias' for
IT procurement
costs. This results in an overall estimated range of costs that are
asymmetric - the uncertainty is greater on the high side that on
the low side. The practical effect of this is that when average
costs across the whole distribution are calculated, they are higher
than the original point estimates.

9.19. This is a subtle analytical point, but from the point of
view of presenting realistic, cost estimates before detailed design
has taken place, we have used the average costs rather than the
point estimates as the primary figures, as these capture a greater
degree of the uncertainty inherent in the modelling.

9.3.2 Results

9.20. Costs for the hybrids are laid out in the tables below, as
average values (Table 16) and as point estimates (Table 17).

9.21. For the average costs estimates, these range from a low of
around £145m to a high of about £170m. and show that
the different models for assessment lead to much greater variation
in costs than the difference between the three hybrids. The
increased expenditure on a more dispersed estate in non-prime
locations for Hybrids Y and Z is somewhat offset by the saving made
by requiring a smaller 'head office'.

Table 16 - Costs of the hybrids (average cost)

Table 17 - Costs of the hybrids (point
estimates)

9.22. Figure 20 captures the uncertainty in these estimates,
showing graphically that the distribution ranges from a low of
around £130m to a high of about £190m. Again, these are
not budget figures, they simply represent our best estimates of the
likely costs of different delivery models, and exist as an aid to
decision-making, where the difference between the estimates is more
important than their absolute level.

Colours show the variation in costs within rows from blue (low)
to white (medium) to red (high).

9.23. Table 18 above shows a breakdown of the cost components. A
significant element of the costs are fixed across all hybrids and
assessment models. This figure of £63m, which represents
between 38% and 45% of the total costs is associated with core
central and corporate functions that would be carried out in the
same way (and in the same location) regardless of the Hybrid
option. So a useful working assumption is that about 40% of the
estimated costs are fixed across all the options. The rest, which
represents pre-claims advice and support staff, assessments, the
estate footprint and
IT/digital costs
are essentially the variable costs. As noted above digital/
IT costs are
highly uncertain at this stage.

9.24. It is sensible to consider the impact of applying standard
and appropriate assumptions (as in section 5.5) around digital
costs. This would again be a contingency of 100% and discussion of
optimism bias of 200% if applying the standard rate at this stage
of the project. This analysis suggests that when taking into
account the variability of the
IT cost
estimates, the 95% sensitivity levels reported in Figure 20 are a
suitably prudent estimate. It should be noted that whilst at this
stage, the additional variation on the digital costs does not have
a bearing on the choice of preferred option, it will be important
that careful and appropriate mitigation is put in place as digital
implementation thinking is developed.

9.3.3 Costs discussion

9.25. There are three key messages from the above analysis;

9.26. The assessment option featuring the
NHS pool (
MA3) is more
expensive than other options for assessment. The two key reasons
for
MA3 being more
expensive than
MA1/
MA2 are:

A. The
NHS staff pool
includes specialists with in-depth knowledge of particular
conditions - these specialists are more expensive than trained
medical staff from within the agency.

B. The resource required for the administration of assessments
(scheduling, liaising with assessors on reports) is assumed to be
much higher in this option (double that of
MA1 and
MA2), on account
of there being a much higher headcount of professionals in the pool
than agency employees in the other options.

9.27. The cost of the assessment option is very sensitive to the
exact mix of health professionals in any option, due to the very
wide variety in hourly rates for different professionals. Notably,
MA3 cost currently
includes medical consultants but
notGPs; including
GPs would make
MA3 even more
costly (by replacing lower paid medical practitioners).

9.28. Hybrids Y and Z are more expensive than Hybrid X. A key
driver of higher costs in Hybrids Y and Z is additional
face-to-face advisers; while all Hybrids feature both remote
support and face-to-face advice, Hybrid X features enhanced remote
support while Hybrids Y and Z feature enhanced face-to-face advice,
with the net effect being a greater resource on pre claims /
support in Hybrids Y and Z.

9.29. Hybrid Z (32 offices) is more expensive than Hybrid Y (8
offices). This is primarily due to the additional front of house
staff (manager, receptionist / post, house staff) and the expensive
"retail" like space that they require. There is also some effect
from whether offices happen to be in prime, secondary or tertiary
rental rate locations. Under assessment option
MA3, Hybrid Y is
nearly as expensive as Hybrid Z. This is because the travel time of
health professionals from their place of work to the 8 offices is
deemed to be significant, which makes overall assessment time
(including travel) higher, with associated costs for staff time

9.4 The preferred option

9.30. The analysis above is conclusive for the choice of
delivery hybrid. It is worth noting that the three delivery hybrids
already reflect the evidence within the strategic, commercial and
management cases so the focus in moving to the preferred option is
based on the
MCA (or
socio-economic case) results and the financial implications.

9.31. As such, hybrid X stands clear from the other two options.
It is the best overall in terms of the
MCA analysis and
it has the lowest cost. As such hybrid X should be considered the
preferred option for the delivery structure of the agency. That is
to say the basic form of the structure should be:

Hybrid X - a central agency with enhanced phone and online
support, which incorporates face-to-face pre-claims and support
services locally in existing public sector locations

9.32. Given the complex nature of the delivery landscape across
Scotland, the choice of hybrid X as the preferred option for the
basic form of the structure should not preclude adaptation to
specific local needs. For instance, existing public sector
locations may be limited in some areas so the agency could explore
alternative options such as a mobile workforce or mobile offices or
consider the use of a limited amount of its own offices if there
would be strong local value.

9.33. The situation with assessments is much more complicated.
Each of the three hybrids have advantages and disadvantages.
Although the use of
NHS
professionals in hybrid
MA3 is more
expensive and is harder to implement when faced with the current
situation it has advantages that could be developed in the context
of wider change.

9.34. For assessment, on current scoring, a model based on
Agency staff carrying out assessments in Agency or other public
sector locations appears most viable. This is very similar to how
assessments are carried out at the moment, but with the crucial
difference that private sector contractors would no longer be
involved. With the choice of hybrid X, this would clearly involve
the use of other public sector locations. However, a model which
uses the existing expertise and workforce of the
NHS is still
being explored. Many of the potential drawbacks of this model which
have been identified through this analysis can now be examined and
addressed directly.

9.35. The optimum choice of assessment process will be dependent
on decisions that are yet to be made around policy and practice. As
such it is too early at this
OBC level to reach
a preferred option for assessments. All three assessments models
examined as part of this section and indeed other variants which
could include contracting with an external organisation could be
implemented with any of the three hybrid options and with the
preferred hybrid x in particular. As such this refines the
preferred option overall, at this stage, to:

Preferred option -
a central agency with enhanced phone and online support,
which incorporates face-to-face pre-claims and support services
locally in existing public sector locations and with assessments
undertaken in a manner that is appropriate for policy choices that
will be made as the final business case is progressed.

9.36. The job requirements are subject to considerable variation
based on detailed decisions yet to be made but it is reasonable to
suggest that the central agency will be directly responsible for at
least 1500 jobs (Full Time Equivalents) with a number of additional
staff in other locations.